Calls soar as $VIAB spikes higher

Viacom surged minutes before the market closed today, leading to huge gains in bullish option positions opened just 48 hours earlier.

On Wednesday, Investitute’s tracking systems found that 10,000 Weekly $30 calls expiring on March 2 were purchased for $1.70 to $2 with shares at $30.07. This was fresh buying, as there was no open interest in the strike before the trades occurred.

Those calls sold for $5.60 just before the closing bell today, more than 3 times their original purchase price. The stock rose 16.9 percent in the same time, showing how quickly options can far outpace gains in their underlying shares.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

VIAB jumped 9.57 percent today to close at $33.76. The stock rallied sharply in the last 20 minutes of the session amid reports that Viacom was interested in pursuing a merger with CBS.